BUDWEISER (ANHEUSER-BUSCH)MARKETING PLAN

THE COMPANY HISTORY

Budweiser is referred to as Bud, a brewing company founded at St. Louis in the mid 1800s.

Budweiser beer is America’s drink. One out of five alcoholic drinks sold in America is a Bud. It is

the world’s most popular beer. In 1865, the brewery produced 8,000 barrels. These numbers

grew quickly when Budweiser Lager Beer was introduced to public in 1876. The company

expanded rapidly and controlled all the means for producing its beer. In the 1950s, the

company expanded its businesses in various cities, in an attempt to tap into a European

tradition. In 1970s, Budweiser became a true icon of American culture, thanks to a model of

commercial development, the envy of the world. In 1980, it made a history by expanding into

the global marketplace with agreements to brew and sell in Canada, Japan, and elsewhere.

Budweiser along with the brand extensions Bud Light, Bud Dry and Bud Ice is creating an image

for itself: a mass-produced, drinkable beer that symbolizes the “good life”. Now, the King of

Beers is being sold in more than 60 countries worldwide.

Company Mission:

“During production of the Budweiser Budvar lager we use traditional procedures and the

knowledge passed down to us by previous generations of brewers. We produce our beer

exclusively from the highest quality raw materials – whole heads of Žatec hop, selected

Moravian malt and virgin clear water from our Artesian wells. Due to the unavoidable

delicious flavour, unique composition and care in production, our lager is searched for by

lovers of high quality beer in all continents.”

BUDWEISER WITHIN THE BEER INDUSTRY The beer industry in USA is still in a growing stage. On 2006 the total industry production

amounted to 196,721 million barrels, not including non alcoholic beers, an increase of 1.9%

from the period before (2005). Another main indicator that confirms this stage is the augment

in the number of new competitors, mainly foreign ones. Actually, the largest growing sector is

imported beers with an 11.5% increase in barrel production, representing 13.5% of the total US

market1.

On average, US Households spent $426 in alcohol beverages. Households in the <$49K

category spent 57% of their “alcohol budget” on beer while high income households only spent

41% on beer. The top ten states: California, Texas, Florida, New York, Illinois, Ohio,

Pennsylvania, Michigan, North Carolina and Georgia comprise near 53% of the total American

market.

The U.S. beer industry is divided into three basic levels of brewing according to annual

production: high volume, regional, and small breweries.

The large breweries: annual shipments of over 15 million barrels.

The regional breweries: annual shipment of less than 15 million barrels.

The small breweries: consist of microbreweries and brewpubs.

1 http://www.beerinstitute.org/statistics.asp?bid=220

Budweiser ™ is produced by Anheuser-Busch (AB). AB’s market share is 48.4 percent, shipping

over 102.3 million barrels. Budweiser is the most well-known beer brand and leads the beer

market in USA. Its main competitors in this market are Coors, Heineken and Miller 2. Besides

competitive forces, Budweiser also faces social and regulatory forces.

2

Total Industry 2006 November YTD (1,000s of Barrels)

11.5%2,73926,54623,807Imports

2.9%1013,5543,454Exports

196,721

946

166,675

YTD 2006 Barrels

3,732

-105

948

Volume Change

1.9%192,989Total Industry

-10.0%1.051Non Alcoholic

+0.6%165,727Domestic Production

Percent Change

YTD 2005 BarrelsIndustry Segment

Source: Beer Institute, 2006

Note for 2006: Molson/Coors closes Memphis brewery and temporarily moves some production including NAs to Canada.

REGULATORY FORCES:

It is mandatory to all alcoholic industry to warn the consumers about the consequences of

alcohol abuse. Budweiser has placed resources and developed many campaigns to prevent

underage drinking as well as alcohol abuse for the last 25 years.

Another implication of the regulatory forces is the high taxation imposed on alcoholic

beverages, for beer this is around $0.19 per gallon, ranging from $1.19 in Alaska to $0.02 in

Wyoming. This tax is a government attempt to discourage possible drinkers by rising beer

2 http://finance.aol.com/quotes/anheuser-busch-companies-inc/bud/nys/profile

prices. Actually Budweiser has had to implement moderate price increases during the last years

instead of a big one to compensate taxation with a minimal loss of customers.3

SOCIAL FORCES:

American market is a highly segmented one in terms of demographics. This means that every

state is a particular market and marketing strategies must be developed for each situation. This

represents different marketing mixes throughout US, forcing cost increases.

Budweiser main goal is to maintain its position as beer brand leader. It bases its marketing

strategy in employing psychological influences to affect the final purchases decision. Given that

Humans tend to retain funny images in their minds more than serious ones, Budweiser uses

humor to influence the selective retention process and place its brand in the minds of the

consumers. Some famous campaigns have entered the popular culture in the United States.

That is the case of the campaign built around the phrase “Whassup”.

Budweiser not only uses catchy phrases to retain and attract new customers. Cognizant that the

greatest consumers of domestic beers are young sport-minded men and woman; Budweiser

sponsors many sports ranging from form baseball to fishing competitions, in order to maintain

brand awareness in different market segments.

As a conclusion, several factors affect today’s Budweiser’s marketing strategy. Our goal will be

to take the position of the Budweiser’s marketing group to study and analyze these factors and

provide meaningful suggestions to this strategy.

3 http://www.anheuser-busch.com/_pdf/2006AR_Anheuser_Busch.pdf

BUDWEISER’S SWOT ANALYSIS

Effective marketing campaigns

Strengths

Strengths

Financial Status Market share Distribution channels Cutting edge manufacturing plants Good marketing Brand name recognition creating

strong competitive advantage and customer loyalty

Highly recognized reputation among customers

Weakness

Wholesalers and retailers do not sell the product properly.

High reliance on the US market. Increase of cost of production

results in low profit margin. Rising prices of barley and wheat.

Shortage of beer ingredients

Opportunities

The international market is four times the size of the U.S. market.

New alliances by becoming the

U.S. beer importer of a number

of inBev’s premium European

brands such as Beck’s, Bass

Pale Ale.

Becoming an importer for the

Dutch premium lager Grolsch,

Singapore’s tiger Beer and

Czechvar premium Czech Lager

Establishing new relationship with Hansen Natural Corp; none beer related producer of energy drinks such as Monster Energy, Lost Energy.

Threats

U.S.: Miller-Coors new alliance.

Local companies already established within every international market.

Extra costs involved with oversees distribution or production

Miller and Molson Coors Brewing joint venture

High industry competition. In 2001 the company experienced decrease in market share due to Miller’s discounted marketing approach.

Anti-alcohol campaigns can have negative effect on overall sales

New regulatory forces can limit sales volume

Anheuser-Busch has many different strengths that will help them if they where to look into new

markets. One advantage that Anheuser has is their financial status.

A look at their annual report shows that they achieved their best results of the decade4.

Earnings per share increased 16.2%. Sales to retailers increased 3% over the year. They also

received 3% more revenue per barrel due to more cost-effective manufacturing. Sales for all of

Anheuser’s major brand families increased, and Bud Light continued with its eighth consecutive

year of double-digit growth. Anheuser has strength in other areas to. Budweiser controls 70.1%

of the domestic beer market. Their nearest competitor is Miller Genuine Draft with 11.2% of

the market share. Anheuser’s distribution also gives them more power in the industry. They

have devised an incentive plan for their wholesalers that reward them for selling only

Anheuser-Busch products. This plan focuses the wholesaler on selling only one product group.

This approach had helped boost domestic sales over the competition. Anheuser’s

manufacturing plants are the most technologically advanced in the industry. This is due to a

modernization program that involved updating and replacing old equipment. This has reduced

cost by around $300 million per year. It has also increased the output of each facility. Anheuser

has an advantage because of their name. Budweiser is one of the most valuable trademarks in

the world today. This is due to the large number of promotions they have each year.

Weaknesses

Budweiser focuses on brand positioning and massive distribution, however even though they

offer great incentive programs for their wholesalers, they may not have the proper direction to

sell the product efficiently. If the wholesaler is not promoting, sales in the area will be hurt.

4 http//:www.anheuser-busch.com-2006ARAnheuser_Busch.pdf

Actually Budweiser’s retail performance is poor considering its marketing investments, which

sometimes end up boosting competitor’s retail sales.

Another problem is that Budweiser is stuck in a mature market where domestic volume

dropped 1.8% in 20055. Although it reported its first profit increase in five quarters in July and

sales grew 5.9% to $4.26 billion, it needs to reduce its reliance on the US market. It has tried to

build a worldwide brand by marketing campaigns, such as plastering the Budweiser logo on

stadium walls at the FIFA World Cup, and through local partnerships.

Opportunities

Right now, Anheuser has a big opportunity to increase globally. The international market is

four times the size of the U.S. market. This allows them many chances to expand their market.

With a bigger market it will also give Anheuser a chance to experiment with different product

lines that may appeal to different market segments. The size of the international market may

also be more likely to produce higher growth rates. With less restriction on trade barriers it

gives a company a better chance to import products into a country. It is a lot easier for a

company who has the resources to enter new markets. However, their biggest focus is in

creating new alliances with other large beer distributors such as inBev’s and Hansen Natural

Corp.

Threats

Budweiser faces two types of threats, international and local ones. The first one is that even

with Anheuser’s size Budweiser will still have threats when entering new markets. They will

have to compete against the existing companies that have already established themselves in

the market. They could drive Anheuser out before they even get a chance to fight. Competing in

5 http://www.managementtoday.co.uk/search/article/606071/on-move-august-busch/

another country can be very expensive. Keeping costs down will be a problem that arises. They

will have extra costs involved with oversees distribution or production. The costs will be

absorbed in the price of the product. Lower priced alternatives would be able to compete and

slow down their market growth. Foreign exchange rates will also have a big impact on

operations in the international market. They could cause a big loss in profits due to a shift in the

rates. Increased barriers or government regulations could also prevent market penetration.

Another possible source of threats could be the regulation of their ability to advertise and

market their products the way they currently do.

The second threat for Budweiser is local: Now, A-B's last two significant U.S. competitors have

combined in a joint venture called MillerCoors6. They are projecting that MillerCoors will

achieve $500 million a year in cost savings, which will flow straight to the bottom lines of the

two parent companies, besides MillerCoors will have a market share of 29 percent, the closest

any rival has been to the St. Louis colossus in 20 years. This cost reductions will eventually

reduce Coors and Miller prices, expand their distribution channels and allow them to compete

in more even conditions against Budweiser.

6http://www.stltoday.com/stltoday/business/columnists.nsf/davidnicklaus/story/A12DBB54918677EB86257370000CF663?OpenDocument

Beer Industry Environmental Analysis

Beer is broadly enjoyed across all key demographic segments.

I. % of Total Beer Consumers in each Demographic Segment

A. Age

B.

Ethnicity

C. Gender

D. Occupation

Age MA-27 28-34 35-49 50+

% 17% 18% 34% 30%

Ethnicity white African-American

Latino

% 84% 6% 10%

Gender Male Female

% 70% 30%

E. Income

II.Growth of these key consumers groups will impact growth of beer consumption.

10-Year Growth Estimate

21-27 Year old +7%

Latino +30%

African-American +18%

50+ population +27%

III.Beer buyers are very similar to beer drinkers

IV.Beer is purchased in greater quantities and more than any other type of alcohol beverages.

V.Grocery is the most common beer channel choice

Occupation White Collar

Blue Collar

Gray Collar

other

% 21% 19% 33% 27%

Income <$35K $35K-49K $50k or more

% 25% 17% 58%

Grocery is the channel of choices for nearly 1/2 of beer buyers.

Channel Grocery/

Supermarket

Liquor

store

Convenience Mass

Merchandise

Drug Warehouse

club

Others

% 46% 21% 13% 5% 2% 3% 10%

COMPETITOR’S ANALYSIS

Because of the high costs involved in the production equipments Budweiser’s competition

has been narrowed down to three main competitors: Miller, Coors and imported beers:

Heineken and Corona. Nevertheless, Corona cannot be considered a real competitor since A-B

owns a 50% share in Grupo Modelo7, Corona’s manufacturer, and it is imported by A-B as a way

to fight back Heineken’s growing market share.

8

Advertising is a key issue in beer competition and it focuses on selling a high quality brand.

Budweiser places $4.08 per barrel in advertising, and sells a fresh image normally related with

sports, Miller’s ads cost per barrel is around $6.09. It represents itself as a great product for

people who deserve it, and finally Coors’ ads cost per barrel is $8.63, in an effort to change the

spread image of a product for anti-gay and anti-feminist consumers.

In an attempt to reach as many markets as possible and fight competition more efficiently,

Budweiser has developed a whole line of products, taking advantage of its brand name to place

them in the market. That way, we can see different types of beer all related to Budweiser: Bud

light, Bud Silver, Bud Ice, Budweiser Select, Bud Dry and Bud Silver.

7 http://www.sinofile.net/Saiweng/swsite.nsf/Pr?readform&60438 http://www.deed.state.mn.us/bizdev/PDFs/beer.pdf

Recently Budweiser and the beer industry in general are facing a fast growing competitive

market: wine. American average consumer is changing his drinking habits for alcoholic

beverages considered more “refined” such as wine, while wine manufacturers are focusing

more in low income consumers, reducing wine prices and advertising its benefits. Actually, The

United States is set to overtake France in the next five years as the world's largest wine market,

U.S. consumption of still wine, that is, not sparkling wine, is estimated to rise to 27.3 million

hectoliters, or 721.2 million gallons, in 2010 from 23 million in 2005, and a great part of those

consumers will come from the beer market.

BUDWEISER’S EGG DIAGRAM

Budweiser’s Current Marketing Mix

Current Products

 Budweiser Family

BudweiserBrewed and sold since 1876, Budweiser leads the U.S. premium beer category, outselling all other domestic premium beers combined.

Bud LightIntroduced nationally in 1982. Bud Light contains more malt and hops by ratio of ingredients than Budweiser, which gives the brew a distinctively clean and crisp taste.

Budweiser SelectBud Select is a new beer developed by using two-row and roasted specialty malts for a rich color.

Bud Dry Introduced in 1989 Bud Dry is the first dry-brewed beer produced by an American brewer.

Bud IceIntroduced in 1984, Bud Ice is a smooth-tasting ice beer. Bud Ice’s ice-brewing process creates a slightly sweet taste.

Bud Ice LightBud Ice Light was introduced in 1994. Bud Ice Light combines Bud Ice’s unique taste profile with fewer calories.

Current Price

The management of Anheuser-Busch Cos. Inc. estimated that 2007 earnings for the brewer

of Bud Light and Budweiser are expected to exceed company targets because of a stronger beer

market. The annual beer shipment volume grew by 2.1 percent in 2006, the best annual

performance since 1990. In 2007, industry growth is estimated to be 1.8 percent and it is

exceeding prior expectations. The strong industry is caused by favorable pricing environment

within the last two years. So far, the brewer raised prices in several states in the fourth quarter

and plans to continue to implement price increases in early 2008.

Current Promotion

The company includes in its marketing promotions a long line of TV advertisements. It is also

known for the sports sponsorship, video games (Tapper), and a vast presence in motor sports ;

Bernie Little's Miss Budweiser hydroplane boat, sponsoring the Budweiser King Top Fuel

Dragster driven by Brandon Bernstein. Budweiser is also the official beer of NHAR and NASCAR.

The company also does its marketing through popular music. Budweiser is an official partner

and sponsor of Major League Soccer and the Major League Soccer and Los Angeles Galaxy as

well as the headline sponsor of the British Basketball League in the 1990s.

Current Place

The company distributes it’s product within American market and has the largest market share

within the beer industry. Additionally, marketing management team creates new segments that

target many different international sectors. Anheuser-Busch International uses dual focus in its

marketing strategy: making equity investments in leading brewers, growth markets and

increasing Anheuser-Busch brand sales in international markets.

New Markets

Central-America

The beer market in Central America has been growing an estimated 4 percent annually since

2000.

China

China is by far the world’s largest and fastest growing beer market and during the past five

years has accounted for 45 percent of the growth in global beer volume. Over the past 10 years,

industry volume growth has averaged 7 percent annually. Anheuser-Busch is well-positioned to

take part in the substantial long-term growth opportunities in this country.

Canada

Budweiser remains the No. 1 beer brand in Canada through a very successful license and sales

agreement with Labatt Breweries.

Mexico

Mexico is the largest export market for Anheuser-Busch beers, and Bud Light and Budweiser

lead the growing import category through a distribution partnership with Grupo Modelo,

Mexico’s leading brewer.

Russia

Russia is the world’s fifth-largest beer market, and consumers there are increasingly turning to

beer, especially premium international brands.

Recommended Marketing Strategy for the Company

Anheuser-Bush has been the largest growing company within the beer industry. It sells its

product not only in America but also all over the world with long term goal of targeting other

large potential markets. Information gathered above has been rather impressive however, after

closer analysis we believe that every company should have some room for improvement. This is

why our team suggests some improvement as well as new marketing ideas that the Anheuser-

Bush should implement in their long-term marketing strategy.

Product

The company has been very successful in being able to separate its product from the

competitor’s products. People are very aware of its unique taste and quality. After, analyzing

beers offered by the company we think that the products offered do represent wide range of

diversity in tastes and also fulfill desires of many different marketing segments. For instance,

the line of Bud Light that contains lower amount of calories definitely attracts clients that are

more weight conscious; for instance, women. We also support an idea that the company

introduces seasonal flavored beers such as chocolate or cherry during seasons such as

Christmas time. This marketing strategy attracts additional clients, who don’t drink beer on

regular bases but enjoy it during holidays.

Price

Price of beer in general is rather elastic, which means that the price increaser, decreases

demand for the beer. This is due to the fact that customers can always find other alcoholic

beverages that might substitute for the beer such as hard lemonades, wine, etc. Recent high

prices resulted from increase of average barley prices by 17% since the beginning of the year to

the highest in 11 years. This increase is partly because farmers are devoting less acreage to the

grain in favor of more lucrative crops, especially corn. Barley has also become more expensive

because now that more corn is being sold to make ethanol, there is less corn available to be fed

to animals. That is leading to greater demand for other feed grains, including barley, for

livestock. For instance, Anheuser-Bush Europe, whose sales results include France, Spain and

Italy have shown that their overall revenues decreased due to high prices of beer and reduction

in product demand. Therefore, our recommendation would be for the company to focus on

developing cost reduction strategy that eventually would be recommended to implement

within all of their marketing segments.

Promotion

As we previously stated the company has been involved in many various ways of marketing

promotions, however not all of them have been as successful as expected. For instance,

Budweiser introduced new idea of targeting its audience through their own bud TV. It is a

creative idea of reaching out to customers who specifically are interested in that kind of

product. This idea seems to be very attractive at first, however was not as victorious as the

company predicted. This concept did not work because, first of all the channel’s name implies

that it is specifically related to beer only, which limited audiences interest, especially women.

Second of all, this channel is available on-line and is a subject to strict age confirmation, which

results in visitor’s driver license verification. This causes too much inconvenience for many

viewers. Overall, at first good idea turned into a total disaster. Furthermore, decrease in

promoting smoking also negatively affects beer sales, since both complement each other very

well. This should be another challenge for the company on how to promote it’s product without

promoting alcoholism and bed lifestyle habits. We believe that the company should also focus

on maybe promoting heritage of beer rather than humorous and free of worries way of living.

Place

Anheuser-Bush is the largest worldwide beer selling company. They sell their product almost

everywhere. Our recommendation would be for the company to be very careful and sensitive

to the wants and cultural tastes of each market that’s being targeted. Cultural differences, and

marketing trends differ from country to country, therefore promoting all American beer in

China will probably not be the best idea. The marketing product introduction should be maybe

presented as a beer that is for open minded people that crave the worldly taste. Each market

should be given a lot of attention and studied carefully.

MARKETING PLAN

BUDWEISER

TEAM 4

Coral Andres

Kralka Kasha

Dang Michael

Yang Yuhan

Sultan Mohamed